What do SalesForce, Shopify, Square and Slack have in common?
Most obviously, their names begin with S. Less obviously perhaps, so do their business models.
Each of those organizations is a Software-as-a-Service (SaaS) company and that’s a critical component in their success.
There are three important elements that distinguish SaaS from other types of software:
- Licensing: customers pay to access the software on a subscription or consumption basis
- Deployment: the software is owned, managed and delivered in the cloud by a third party
- Architecture: the software is uniquely designed to deliver new value through multi-tenancy and non-relational databases
Software-as-a-Service has been around for nearly two decades, but more recently, adoption has really accelerated. SaaS now accounts for more than 80% of customer relationship management, more than 70% of human capital management and nearly half of enterprise resource planning software by revenue.
Suffice to say, not all SaaS companies are growing exponentially, but in this day and age, many of the companies growing exponentially are SaaS companies.
What’s providing that momentum? Here are three of the biggest drivers.
Business Agility
Traditional on-premises software deployments require purchasing new licenses and upgrading to new versions to access the latest features. On the other hand, SaaS solutions improve with continuous updates and can scale up or down to meet organizational needs as they evolve.
That combination of scalability and continuous functionality is a very advantageous one. It gives companies the ability to effectively utilize the software’s latest features and capabilities while responding quickly to changes in market demand.
Collaboration
Multi-tenancy and non-relational databases improve collaboration. In plain language, that means it’s easier for multiple people to work together when they can all do their part at the same time. Shared documents that everyone can see and edit simultaneously is one example; customer support with SaaS-based digital twins and augmented reality is another.
In today’s increasingly global and interconnected world, plenty of workers and companies are already accustomed to using these sorts of tools. Having that single, centralized source of data also helps with production innovation, support and service as well.
IT/OT Integration and Collaboration
Integration of Information Technology (IT) and Operational Technology (OT) significantly improves operational efficiency and enables new business models by allowing companies to invest where value is added and divest where it isn’t.
One example: by consolidating the cost of maintenance, hardware infrastructure and related IT overhead across all end users, SaaS vendors can leverage economies of scale to deliver a better software experience at a lower overall cost.
Volvo, one of the world’s largest employers and leading manufacturers, has successfully implemented several of these digital transformation initiatives. A couple highlights:
- Using IIoT to reduce the time needed for updating and validating configuration and QA checklists from one day to one hour
- Incorporating AR to reduce training time from five weeks to less than two weeks
To learn more about how Volvo is doing that, the role that SaaS is playing in digital transformation and what the future looks like beyond 2020, download this whitepaper from ABI Research.
